Identity theft is more common than ever. As people figure out new ways to get and use your personal information, the crime becomes very real for hundreds of people every month.

You may think that identity theft could never happen to you, and that you'd know almost immediately if it did. The truth is that anyone can be scammed with identity theft. You don't have to lose your driver's license or social security card, and you don't have to give personal information to an unscrupulous seller online. You don't even have to have a credit card.

The first step in protecting yourself from identity theft is to understand how it happens. If a person has enough of your personally identifying information to fill out a credit card application (stop and think about how little information that sometimes requires), they have enough to do extensive damage.

But why wouldn't you know? Typically, a person who takes steps toward identity theft will start by announcing to potential creditors that he or she has a new address and phone number. That means that you won't get credit card applications, approvals or bills. The person who does the identity theft may take out credit cards in your name and start using them. And that person may even make minimum payments for a few months, extending the time it takes for the theft to come to the attention of the companies that granted credit and the person who has been victimized.

This is where credit reports can help stop the process before it has time to snowball. Here's how:

If you apply for a credit report, you'll get information from one, two or three major credit reporting companies – Experian, Equifax and TransUnion. All three are generally recognized within the United States. There may be slightly different information on reports generated by each company. But how will asking for a copy of your credit report help you catch identity theft before it has time to get out of hand?

It's actually pretty simple. If you apply for a credit card, that application will show up as part of your credit report. The number of times you apply for is used by some potential creditors in the decision-making process. So if you find credit applications that aren't yours, you can immediately report this and start the process toward protecting yourself.

You can get a free credit report once every year from each of the three major companies. Some people say they rotate the credit reports so that they are getting one from TransUnion this month, one from Equifax next month, and so on. Regardless of how you go about it, watching your credit report can be a vital step in protecting yourself from financial ruin because of identity theft.

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